Written by Jaspreet Kalra
MUMBAI (Reuters) – The Indian rupee fell on Wednesday, posting its worst day in nearly two months, as demand for dollars from importers and foreign banks erased almost all of the currency’s gains earlier in the week.
The rupee closed at 83.9225 against the US dollar, down 0.16% from its close of 83.87 in the previous session, its biggest one-day decline since June 26.
The index gave up gains after touching a two-week high of 83.7550 on Tuesday. The index rose 0.1% to 101.5, recovering slightly from a drop to a more than seven-month low earlier in the day.
The local currency has fallen 0.2% so far in August even as its Asian peers have gained on the back of a 2.5% drop in the dollar index.
Traders said strong demand for dollars from importers coupled with outflows from stocks weighed on the rupee. Foreign investors have sold over $2.5 billion of Indian stocks so far in August.
In addition, some exporters refrained from selling dollars in anticipation of further weakness in the rupee, which affected the overall supply of dollars in the market, according to a foreign exchange seller at a private bank.
Traders will be looking ahead to the minutes of the Federal Reserve’s July meeting and a review of U.S. payrolls data, both due later in the day.
“The market seems to be in a dollar selling mood. The fuel for today’s dollar selling could be some benchmark revisions to US jobs numbers,” ING said in a note.
Sharply lower adjusted payrolls numbers are also likely to prompt investors to raise their bets on deeper rate cuts from the Fed than the roughly 100 basis points of easing currently being priced in.
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